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Move over crowd-sourcing, here comes ITO 2.0!

The outsourcing journal recently had a good article on OpenWater Networks and how it partnered with Augmentum to build its Enterprise 2.0 Service Network – a “Social Network” for work – using “IT Outsourcing 2.0” or ITO 2.0. What is ITO 2.0? It’s the outsourcing of IT work to where the best brains are. Which is the way it should be.

I really liked some of the common sense quotes in the article from Timothy Chou. When he says that if you outsource to someone who is cheaper but not as smart as you, you have to spend a great deal of time managing them and that you (have to) look over everything down to the tiniest detail, he couldn’t be more accurate. It’s also true that this causes you to lose your economic advantage. However, it’s not true if you hire someone smarter than you (who has a PhD, for example) because you (can) let them flourish on their own. Just like when you hire an executive chef, you don’t have to tell him how to cook – you just have to tell him that you want a chicken dish that’s sweet and spicy and then let him work.

The advantages of this method, when compared to ITO 1.0 – which takes you to where the warm bodies are cheapest, are that partners are free to demonstrate their expertise, there is (essentially) no duplication of work, and innovation can flourish. As long as you make sure everyone speaks a common language from day one, the method can utilize the talents of all involved – especially if you augment the method with regular face-to-face communication. OpenWater personnel, in San Francisco (California, USA), make regular visits to Augmentum’s sites in Shanghai and Beijing (China) and Augmentum developers routinely visit the Openwater offices in California. This encourages the move away from e-mail, where context is loss, to the “service networks” that OpenWater is developing. This not only helps OpenWater and Augmentum build innovative software that would have cost them 10 times more money and 10 times more time if they had done it under ITO 1.0, but insures that the products are actually consumable – as, to borrow a phrase, they’re eating the dog food they make.

So how does this differ from crowd-sourcing? In crowd-sourcing, everyday people using their spare cycles to create content, solve problems, [and] even do corporate R & D and the company takes advantage of the collective to augment their internal capabilities. In ITO 2.0, the company is going out to the collective and specifically seeking out the best and the brightest. It then uses the network to share information and form relationships with these individuals to advance the common goals. In essence, the major difference is crowd-sourcing is ad-hoc and more in tune with open source while ITO 2.0 is more organized and more in tune with standard corporate methodologies. And the major similarity is that both revolve around the same underlying principles of using the network and the best and brightest to get the work done (wherever they are) – and that’s a good thing.